Samsung scraps powerful Future Strategy Office

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Samsung scraps powerful Future Strategy Office

Samsung declared the dismantling of its 58-year-old Future Strategy Office Tuesday, saying the power concentrated in the office would be spun off to subsidiaries as part of its greater corporate reform plan.

The announcement came on the final day of the 90-day independent counsel investigation of political corruption that deeply implicated Samsung.

Samsung Electronics Vice Chairman and de facto leader Lee Jae-yong, who was indicted Tuesday on bribery charges, vowed during a parliamentary hearing over the scandal in early December to abolish the central planning office. It was accused of orchestrating the funding of projects led by impeached President Park Geun-hye’s confidante Choi Soon-sil.

“We once again would like to apologize for causing trouble and concerns to society,” said Lee Joon, Samsung’s chief communications officer, in a press briefing Tuesday at Samsung Electronics’ Seocho building in southern Seoul. “We are completely shutting down the Future Strategy Office after taking to heart that the situation has become so severe entirely because of the office.”

The office’s two leaders - Vice Chairman Choi Ji-sung and President Jang Choong-ki - stepped down to take responsibility for the debacle. The resignation of the men, who had served bedridden Samsung Chairman Lee Kun-hee as well as his son Jae-yong, means they are “leaving Samsung entirely,” chief communications officer Lee explained.

Choi and Chang are symbols of the secretive goings on in the top level of Samsung. They were behind critical management decisions, unofficial lobbying activities and external communications. They also taught the chairman’s only son and heir about management as Samsung went through its leadership transition in recent years.

Park Sang-jin, president of Samsung Electronics, who was also head of the Korea Equestrian Federation, resigned from both positions. He has been grilled by special prosecutors over his role in the scandal. Samsung also administered a reshuffle below the executive level on Tuesday.

In a related measure, Samsung will make it mandatory for any subsidiary to receive approval from board members for donations exceeding 1 billion won ($886,170) to a third party, following a board meeting of Samsung Electronics on Feb. 24.

All subsidiaries will have their autonomy beefed up following the Tuesday measures, with their CEOs and boards making their own decisions. Crucial issues will be discussed amongst related subsidiaries and Samsung Electronics, the de facto holding company, Samsung Life Insurance and Samsung C&T will play central roles.

“Respective subsidiaries will proceed with autonomous management and come up with follow-up measures later,” Lee said, without offering further details.

With the Future Strategy Office gone, the traditional gathering every Wednesday of CEOS and presidents from all Samsung subsidiaries, which was led by the office, will end. The biannual recruiting process for some 10,000 entry-level and mid-career workers for all subsidiaries will be scrapped following the final one scheduled within the first half. Subsidiaries will from now on pick their own recruits on their own timelines.

The Future Strategy Office has some 200 workers, including 60 executives dispatched from different subsidiaries. Some of them will return to their original posts, while others will be sent to new ones, effective today. The office has eight divisions responsible for strategy, planning, human resources support, legal dealings, public relations, management assessment and synergy creation among financial subsidiaries.

Dubbed “mijeonsil,” a Korean acronym for its full name, the office has a storied past. It began as a private secretariat under Samsung C&T on the orders of Samsung founder Lee Byung-chull in 1959. Its power grew in tandem with the rapid expansion of Samsung in the late 1970s.

In 1998, during the Asian financial crisis, it was renamed the “structural adjustment headquarters” and was headed by Chairman Lee’s closest aide, Samsung Electronics Vice Chairman Lee Hak-soo, who was nicknamed “Samsung’s No. 2.” The headquarters lasted until 2006. Between 2006 and 2008, the office was called the strategy planning office. It was disbanded in 2008 after Chairman Lee Kun-hee was embroiled in a slush fund scandal and briefly left management.

But the office never entirely disappeared. Only its name has changed over time. In 2009, it was reborn as a “strategy planning office” and was again renamed “Future Strategy Office” in 2010 as Chairman Lee returned to the helm.

But some analysts have voiced concerns over the scrapping of an office that has effectively taken care of all the major affairs at the nation’s most valuable conglomerate.

Kim Sang-jo, chairman of the civic group Solidarity for Economic Reform and a professor of economics at Hansung University in Seoul, released a statement on Tuesday that Samsung has yet to show how it would step up synergy among subsidiaries and how each subsidiary will adjust its roles and functions.

“The measures are suspected to be a mere strategic move to help Vice Chairman Lee obtain an advantageous position at upcoming trials,” the long-time advocate of chaebol reform said.

SK, which has a history of its chairman serving prison terms, and otherconglomerates such as Lotte and Posco are already equipped with a separate unit designed to effectively maintain corporate operation in the absence of top managers or under emergency situations.

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